Amcor Limited (ACN 000 017 372) v Trevor Mark Barnes
[2021] VSCA 87
•8 April 2021
SUPREME COURT OF VICTORIA
COURT OF APPEAL
S APCI 2012 0045
| AMCOR LIMITED (ACN 000 017 372) AND ORS | Appellants |
| v | |
| TREVOR MARK BARNES AND ORS | Respondents |
S APCI 2012 0066
| AMCOR LIMITED (ACN 000 017 372) AND ORS | Appellants |
| v | |
| JAMES GEORGE HODGSON AND ANOR | Respondents |
S APCI 2012 0181
| JAMES GEORGE HODGSON AND ANOR | Applicants |
| v | |
| AMCOR LIMITED (ACN 000 017 372) AND ORS | Respondents |
S EAPCI 2020 0021
| AUSTRALIAN CORRUGATED BOX CO PTY LTD (FORMERLY ACHILLA PTY LTD) (ACN 104 489 581) AND ANOR | Applicants |
| v | |
| ORORA LIMITED (FORMERLY AMCOR PACKAGING (AUSTRALIA) PTY LTD) (ACN 004 275 165) AND ANOR) | Respondents |
S EAPCI 2020 0029
| ORORA LIMITED (FORMERLY AMCOR PACKAGING (AUSTRALIA) PTY LTD) (ACN 004 275 165) AND ANOR) | Applicants |
| v | |
| AUSTRALIAN CORRUGATED BOX CO PTY LTD (FORMERLY ACHILLA PTY LTD) (ACN 104 489 581) AND ANOR | Respondents |
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| JUDGES: | FERGUSON CJ, BEACH and WHELAN JJA |
| WHERE HELD: | MELBOURNE |
| DATE OF HEARING: | 17 March 2021 |
| DATE OF JUDGMENT: | 8 April 2021 |
| MEDIUM NEUTRAL CITATION: | [2021] VSCA 87 |
| JUDGMENT APPEALED FROM: | [2012] VSC 94; [2012] VSC 434; [2016] VSC 707; [2019] VSC 393; [2019] VSC 849 |
| JUDGMENT MAY BE CITED AS: | Amcor v Barnes & Ors [No 2] |
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PRACTICE AND PROCEDURE – Orders consequent on judgment – Matters not previously raised – Offers of compromise – Costs – Interest.
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APPEARANCES: | Counsel | Solicitors |
| For the Appellants in S APCI 2012 0045 | Mr P Solomon QC with Mr E Gisonda | Gilbert + Tobin |
| For the First Respondent in S APCI 2012 0045 | Mr J McComish | Brown Wright Stein Lawyers |
| For the Second, Third and Fourth Respondents in S APCI 2012 0045 | Mr S Maiden QC with Ms E Murphy | Mills Oakley Lawyers |
| For the Fifth, Sixth and Seventh Respondents in S APCI 2012 0045 | No Appearance | |
| For the Appellants in S APCI 2012 0066 | Mr P Solomon QC with Mr E Gisonda | Gilbert + Tobin |
| For the Respondents in S APCI 2012 0066 | Mr C Gunst QC with Mr A Solomon-Bridge | AJ Macken & Co |
| For the Applicants in S APCI 2012 0181 | Mr C Gunst QC with Mr A Solomon-Bridge | AJ Macken & Co |
| For the Respondents in S APCI 2012 0181 | Mr P Solomon QC with Mr E Gisonda | Gilbert + Tobin |
| For the Applicants in S EAPCI 2020 0021 | Mr S Maiden QC with Ms E Murphy | Mills Oakley Lawyers |
| For the Respondents in S EAPCI 2020 0021 | Mr P Solomon QC with Mr E Gisonda | Gilbert + Tobin |
| For the Applicants in S EAPCI 2020 0029 | Mr P Solomon QC with Mr E Gisonda | Gilbert + Tobin |
| For the Respondents in S EAPCI 2020 0029 | Mr S Maiden QC with Ms E Murphy | Mills Oakley Lawyers |
FERGUSON CJ
BEACH JA
WHELAN JA:
On 2 February 2021 we handed down reasons for judgment on a series of appeals and applications for leave to appeal (‘the Appeal Judgment’).[1] The Appeal Judgment dealt with applications for leave to appeal and appeals from judgments of Vickery J and Sloss J in the Trial Division in two related proceedings, being a proceeding referred to in the Appeal Judgment as ‘the Hodgson proceeding’ (S CI 2004 09420), and a proceeding referred to as ‘the Barnes proceeding’ (S CI 2007 08181).
[1]Amcor LTD v Barnes [2021] VSCA 6 (‘the Appeal Judgment’).
After a directions hearing following the delivery of the Appeal Judgment, the parties filed submissions as to the orders which should be made, and a further hearing was held on 17 March 2021. There were a number of areas of disagreement between the parties. These reasons address those disagreements. These reasons assume knowledge of the Appeal Judgment.
Areas of dispute
The Hodgson proceeding concerned a claim by James George Hodgson,[2] a former employee of Amcor Limited (now named Amcor Pty Ltd), for amounts allegedly due to him on the termination of his employment by notice on 1 October 2004. Amcor[3] maintained he was summarily dismissed on 13 December 2004, and that he had received all of the amounts to which he was entitled by a payment on or about 13 January 2005. Vickery J found in favour of Hodgson and awarded judgment in a sum calculated on the basis he had been dismissed by notice on 1 October 2004. Amcor appealed and that appeal was successful. The judgment ordered by Vickery J in Hodgson’s favour will accordingly be set aside. It then becomes necessary to determine whether Hodgson remains entitled to judgment for a lesser sum, calculated on the basis that he was summarily dismissed on 13 December 2004. Hodgson and Amcor are in dispute on that issue. Hodgson maintains that he is entitled to a judgment for a lesser sum. Amcor maintains he received all of his entitlements on or about 13 January 2005.
[2]As was the case in the Appeal Judgment, solely for a ease of reference, after the first reference to an individual we will thereafter refer to them by their surname only.
[3]In these reasons we refer to the parties in the same manner in which we referred to them in the Appeal Judgment [24].
In the Hodgson proceeding, Amcor counterclaimed against Hodgson for breach of fiduciary and other duties in relation to the sale of two businesses, one of which was a business referred to as the ‘ACB business’. Vickery J found that there had been breaches of duty but that Amcor had suffered no loss and that Hodgson had gained no profit. Amcor’s appeal on those issues failed.
Hodgson made a number of offers of compromise throughout the proceeding in the Trial Division and made a further offer of compromise during the course of the appeal proceedings. The issue of costs in that context is an issue of dispute between Hodgson and Amcor.
In the Barnes proceeding, Amcor made claims against other former employees, Trevor Barnes, Ian Sangster, Albert Mihelic and Christopher Bayley, alleging breaches of duty relevantly similar to those alleged against Hodgson in relation to the sale of the two businesses.
Before Vickery J, the claims against Sangster, Mihelic and Bayley failed for essentially the same reasons as the similar claims had failed against Hodgson.
As to Barnes, Vickery J found Barnes had breached fiduciary and other duties and initially indicated that he intended to order Barnes to account in relation to a secret interest he took in the ACB business. But he then altered course having been persuaded that relevant matters had not been pleaded by Amcor against Barnes. An appeal by Amcor in relation to those conclusions concerning Barnes succeeded. Barnes now accepts that an order must be made for him to account for profits gained by reason of his breaches of duty.[4] He contends, however, that such an order should not specify particular amounts and should be limited in duration. He also resists any declaration to the effect that the interest in the ACB business which he acquired in breach of fiduciary duty is or was held on constructive trust. These are areas of dispute between Amcor and Barnes.
[4]Barnes’ submission on orders begins: ‘Mr Barnes accepts that the consequence of this Court’s reasons is that there will be an account of profits against him’. In the circumstances, it is unnecessary to require Amcor to amend its pleading against Barnes.
In the Barnes proceeding, Amcor made breach of duty claims against another of its former employees, Craig Holihan. A company associated with Holihan, ACB Australia Pty Ltd (‘ACB Purchaser’), acquired the ACB business under a sale agreement (the ‘Second Sale Agreement’), and another company associated with Holihan, Australia Corrugated Box Co Pty Ltd (formerly Achilla Pty Ltd) (‘Achilla’) conducted that business after the sale. The claims against Holihan and the related companies failed before Vickery J, and appeals by Amcor in relation to those claims have failed.
In the Barnes proceeding, Achilla brought a counterclaim against an Amcor company, Amcor Packaging (Australia) Pty Ltd (now named Orora Ltd) (‘APA’). The counterclaim alleged breach by APA of supply and purchase obligations in the Second Sale Agreement. Achilla succeeded in that counterclaim before Sloss J, but it recovered less than it claimed. Appeals by both Achilla and APA in relation to Sloss J’s judgments on Achilla’s counterclaim each failed.
The amount which Achilla recovered on its counterclaim, being $4,754,463.53, was paid into court pursuant to an order of this Court on 17 March 2020. Achilla seeks an order that that sum be paid to it. Amcor contends $300,000 should be paid from that sum to it as the balance of the purchase price of the ACB business still outstanding under the Second Sale Agreement. Amcor further contends that half of that sum should remain in court pending the outcome of Barnes’ account, and pending potential further claims against parties who may have acquired an interest, directly or indirectly, in that sum from Barnes. Achilla resists any deduction from the judgment sum otherwise payable to it. Because the foreshadowed further claims potentially affect their interests, the Holihan parties also resist any declaration to the effect that the interest acquired by Barnes is or was held on constructive trust.
The parties differ on the cost orders which should be made.
Thus, the areas in dispute are:
1. Hodgson’s entitlements on summary dismissal.
2. Hodgson’s offers of compromise.
3. The relief to be granted against Barnes.
4. The disposition of the judgment sum in favour of Achilla held in court.
5. Costs.
Hodgson’s entitlement on summary dismissal
Hodgson was summarily dismissed on 13 December 2004. He was paid his salary in the usual way until that date. On 13 January 2005, Amcor calculated and subsequently paid what it contended to be, and still contends to be, all of his entitlements on that summary termination.
Amcor did not pay Hodgson any amount in lieu of notice. Hodgson accepts that, given the conclusions in the Appeal Judgment, he was not entitled to payment in lieu of notice.
Amcor did not pay Hodgson a bonus of $160,000 in relation to the 2003/2004 financial year which Vickery J had found was Hodgson’s accrued entitlement. Hodgson contends he remains entitled to judgment for that sum.
Amcor paid Hodgson 5.41 days of annual leave at the rate of $2,061.54 per day. Hodgson contends that his annual leave entitlement was 35.41 days and that the amount due should have been calculated at the rate of $2,892.31 per day.
Amcor calculated Hodgson’s long service leave entitlement as being 169.39 days.[5] Amcor calculated the amount due to Hodgson in relation to long service leave by reference to the rate of $2,061.54 per day. Hodgson contends the rate should have been $2,892.31 per day.
[5]The copy of the document recording Amcor’s calculations on 13 January 2005 is difficult to read but before us counsel for both Amcor and Hodgson agreed that the relevant entitlement was 169.39 days.
Finally, Hodgson contends that he was underpaid salary for the period to 13 December 2004 by a total sum of $16,400.
On each of these issues, one or other of the parties sought to advance contentions either never raised before, or not previously raised by any ground of appeal or in any submission on the appeals.
This Court has repeatedly emphasised that exceptional circumstances will be required in order for a party to introduce an issue for the first time on appeal.[6] In Metwally v University of Wollongong (‘Metwally’),[7] the High Court described the circumstances in which a new argument might be entertained after an appeal had been decided as being ‘most exceptional’, saying that permitting a new matter to be raised in such circumstances was ‘contrary to all principle’.[8]
[6]Vlahos v Vlahos [2017] VSCA 166, [49]–[51] and cases cited therein.
[7]Metwally v University of Wollongong [1985] HCA 28 (‘Metwally’).
[8]Ibid [50].
Unlike the position in Metwally, final orders have not been made on these appeals. In the absence of final orders, the Court can review, correct and alter its judgment at any time.[9] Nevertheless, in our view, exceptional circumstances are required before a matter not raised at trial should be entertained on an appeal, and the circumstances would need to be even more exceptional where the relevant matter had not been raised in any ground of appeal or in any submission on appeal and was raised for the first time after the appeal judgment had been handed down but before orders were made.
[9]Appeal Judgment (n 1) [293].
On the issue of the bonus, Vickery J found that Hodgson had been invited to participate in the 2003/2004 Management Incentive Program,[10] that Hodgson had reached agreement with his immediate superior (Peter Sutton) on the targets which he was required to meet in order to become entitled to a bonus under the program,[11] and that the agreed targets had been met.[12] Before Vickery J, Amcor had admitted that the budget and performance measures required to be met by Hodgson under the program had been agreed and had admitted that upon achievement of those measures Hodgson was entitled to a bonus pursuant to the program.[13] An application by Amcor to withdraw these admissions was refused by Vickery J.[14] Vickery J found that the amount of the bonus to which Hodgson was entitled was $160,000.[15]
[10]Hodgson v Amcor [2012] VSC 94, [481] (‘Vickery J Principal Reasons’)
[11]Ibid [483]–[485].
[12]Ibid [487]–[488].
[13]Ibid [491].
[14]Ibid [492]–[505].
[15]Ibid [507].
There was no ground of appeal which contested any of these findings and conclusions of Vickery J. No submission was made on the hearing of the appeal contesting these findings and conclusions.
On the hearing in relation to orders it was contended by Amcor that the Court could not be satisfied that Hodgson was entitled to the bonus because an agreement which Vickery J had found, and which was the basis for his conclusion that Hodgson had been dismissed upon notice, had been rejected in the Appeal Judgment.
There are three reasons why we reject Amcor’s contention. First, Vickery J’s relevant conclusions are not the subject of any ground of appeal, and were not the subject of any submission made on the hearing of the appeal. Amcor should not be permitted to reopen this issue now. Second, Amcor’s contention erroneously conflates the issue of the agreement as to termination of employment, the existence of which this Court rejected; and the issue of agreement as to the meeting of the budget and performance measures entitling Hodgson to a bonus under the program, which was not in issue before us. Finally, two of the documents relied upon by Vickery J in concluding that Hodgson had accrued an entitlement to the bonus, being a document signed by Sutton on 16 August 2004 and a memorandum dated 19 January 2005, were unrelated to the documents upon which Vickery J relied which had been prepared by Amcor in the context of the negotiations for a termination agreement.
In our opinion, Hodgson is entitled to judgment for a sum which includes the bonus found by Vickery J of $160,000.
In relation to the calculation of the entitlement to payment for accrued annual leave and long service leave, the parties differ on the daily rate to be applied. The rate used by Amcor in its calculation on 13 January 2005, being $2,061.54 per day, was calculated upon Hodgson’s ‘notional base salary’, not upon his total remuneration, which included various other allowances. The rate contended for by Hodgson, and accepted and adopted by Vickery J, was $2,892.31 per day ($752,000/260), being a rate calculated upon Hodgson’s total remuneration.[16]
[16]Ibid [541]
No ground of appeal or submission made on the appeal by Amcor sought to contest the $2,892.31 daily rate adopted by Vickery J. Amcor should not be permitted to reopen that issue now, not having previously raised it as part of the appeal.
Hodgson is accordingly entitled to judgment for a sum calculated by reference to the difference between the rate adopted by Vickery J and that which had been adopted by Amcor. The difference is $830.77 per day. This rate is to be applied to the agreed entitlement to long service leave, being 169.36 days. Thus, Hodgson’s entitlement which remains outstanding is $140,699.20.
The amount of the annual leave entitlement is disputed between Hodgson and Amcor. Amcor maintains the entitlement is 5.4 days. Hodgson maintains it is 35.4 days. The difference, being 30 days, is the period of leave which Amcor contends Hodgson took pursuant to a direction given to Hodgson by Amcor by a letter of 29 September 2004. Hodgson now seeks to contend that that direction was invalid. Hodgson’s contentions concerning the direction involve a consideration of industrial legislation and the terms of Hodgson’s contract.
It was always clear that Amcor maintained that the entitlement to annual leave as at 13 December 2004 was 5.4 days. The contentions now sought to be made by Hodgson concerning the direction were never raised in any pleading on Hodgson’s behalf, were not raised at any stage before the trial judge, or were not raised at any stage on the appeal prior to the hearing concerning the orders which ought to be made. We are not prepared to entertain those contentions now.
As to the alleged unpaid salary, what Hodgson now seeks to contend is that his entitlement up until 13 December 2004 was not to payment of his salary in the way it had always been paid, but that he was entitled to have all of his allowances, in effect, converted to cash entitlements. Again, this contention has never been raised before. We are not prepared to entertain it now.
Our conclusion is that as at 13 December 2004 Hodgson had the following entitlements in addition to those calculated by Amcor on 13 January 2005 and subsequently paid to him:
Bonus $160,000.00
Annual leave (5.4 x 830.77) $ 4,486.16
Long service leave (169.36 x 830.77) $140,699.20TOTAL $305,185.36
Accordingly, Hodgson remains entitled to judgment in the sum of $305,185.36. Vickery J gave Hodgson judgment against Amcor Limited (now Amcor Pty Ltd) on 20 March 2012 in the sum of $917,695. On our findings, the judgment ought to have been $305,185.36, a difference of $612,509.64.
On 20 March 2012 Vickery J ordered Amcor to pay interest at the penalty rate from 1 October 2004. On 1 May 2012 he set aside the order he had made as to interest and ordered that the ‘question of interest’ be heard that day. On 17 May 2012 Vickery J ordered interest of $771,341.32 for the period 1 October 2004 to 1 May 2012; $263.99 interest per day thereafter until 17 May 2012; and thereafter interest under s 101 of the Supreme Court Act. By an order of 14 September 2012 he corrected an error as to parties in the interest order of 17 May 2012.
Interest calculated on the sum we have found to be due ($305,185.36) pursuant to s 58 of the Supreme Court Act, from 1 October 2004 to the date of judgment (20 March 2012) is $252,785.63.[17] Interest to 17 May 2012 would be $257,863.72.
[17] The relevant calculation is as follows:
Start Date End Date Days Rate 01/Oct/2004 31/Mar/2005 182 12% $18,235.73 01/Apr/2005 30/Sep/2005 183 11.5% $17,596.24 01/Oct/2005 30/Sep/2006 365 11% $33,570.39 01/Oct/2006 31/Aug/2008 701 12% $70,267.88 01/Sep/2008 22/Feb/2009 175 11% $ 16,064.73 23/Feb/2009 31/Jan/2010 343 10% $28,679.06 01/Feb/2010 20/Mar/2012 779 10.5% $68,371.60 Total 2713 $252,785.63
Hodgson’s offer of compromise in the Trial Division
Hodgson, and his company Bankson Pty Ltd which was also a defendant to Amcor’s counterclaim alleging breach of duty, made four offers of compromise during the course of the proceedings in the Trial Division, and a further offer of compromise during the course of the appeal proceeding.
The offer of compromise during the proceedings below which is now relied upon was made on 2 August 2007. It offered to settle all of Hodgson’s claims and Amcor’s counterclaim for the sum of $198,926 payable to Hodgson. As at 2 August 2007, the penalty interest on the sum of $305,185.36, which we have found was the amount then due, was $100,104.84.[18] Thus, the offer made was $206,364.20 less favourable to Hodgson than the amount to which we have determined he was then entitled.
[18] The relevant calculation is as follows:
Start Date End Date Days Rate 01/Oct/2004 31/Mar/2005 182 12% $18,235.73 01/Apr/2005 30/Sep/2005 183 11.5% $17,596.24 01/Oct/2005 30/Sep/2006 365 11% $33,570.39 01/Oct/2006 02/Aug/2007 306 12% $30,702.48 Total 963 $100,104.84
At the relevant time, r 26.08 of the Supreme Court (General Civil Procedure) Rules 2015 provided that where a plaintiff made an offer of compromise and obtained judgment on the claim no less favourable than the terms of the offer, then, unless the Court otherwise ordered, the plaintiff was entitled to an order against the defendant for costs on a party/party basis up to the date of the offer and thereafter on an indemnity basis.
In PCCEF Pty Ltd v Geelong Football Club Ltd (‘PCCEF v Geelong’),[19] McLeish JA and Emerton JA (with whom Whelan JA agreed on the applicable principles) described the relevantly equivalent provisions as creating a prima facie rule. They then said:
[19]PCCEF Pty Ltd v Geelong Football Club Ltd [No 3] [2019] VSCA 191 (‘PCCEF v Geelong’).
The party seeking to displace the prima facie rule in r 26.08 bears the onus. The onus is not readily discharged. In Gamboni, Tate JA and Kyrou AJA stated:
In Simonovski, Ashley J stated that while the Court retains a discretion under r 26.08(2)(b) of the … Rules, an ‘order otherwise’ should not be lightly made, and that the prima facie position established by the rule ‘is a strong one, not easily displaced’.
In Saric, McMillan J referred to the language used in the authorities to describe the kinds of case where the prima facie rule has been displaced:
The Court must exercise caution in departing from the prima face rule and only do so in cases that warrant such a departure, invariably expressed in terms such as ‘compelling and exceptional circumstances’, ‘for proper reasons which, in general, only arise in an exceptional case’ and ‘special circumstances’.
Whether the Court will ‘otherwise order’ depends on whether doing so advances the purpose of O 26. That purpose, broadly speaking, is to encourage the compromise of litigation and the saving of the private and public costs associated with it. The reasonableness of the rejection or non-acceptance of an offer is one matter that may be taken into account, but is not of itself determinative.[20]
[20]Ibid [23]–[25] (citations omitted).
In relation to the proposition that the purpose of the relevant provisions was to encourage compromise, the Court in PCCEF v Geelong cited observations of Hayne JA in Grbavac v Hart.[21] Hayne JA said:[22]
[21]Grbavac v Hart [1997] 1 VR 154.
[22]Ibid 164 (emphasis added).
There can be no doubt that it is in the public interest that litigation be compromised rather than fought out. Equally, there is no doubt that the objectives of rules such as those found in O. 26 are, as the Court of Appeal in New South Wales said, of broadly similar but not identical rules in that State:
(1)To encourage the saving of private costs and the avoidance of the inherent risks, delays and uncertainties of litigation by promoting early offers of compromise by defendants which amount to a realistic assessment of the plaintiff's real claim which can be placed before its opponent without risk that its ‘bottom line’ will be revealed to the court;
(2)To save the public costs which are necessarily incurred in litigation which events demonstrate to have been unnecessary, having regard to an earlier (and, as found, reasonable) offer of compromise made by a plaintiff to a defendant; and
(3)To indemnify the plaintiff who has made the offer of compromise, later found to have been reasonable, against the costs thereafter incurred. This is deemed appropriate because, from the time of the rejection or deemed rejection of the compromise offer, notionally the real cause and occasion of the litigation is the attitude adopted by the defendant which has rejected the compromise. In such circumstances that party should ordinarily bear the costs of litigation.
Not only do such objects underlie rules such as O. 26, they are objects to which the courts must pay appropriate regard in exercising the discretion about who should bear the costs of litigation. Especially is that so in times such as these where demands upon the system of justice have increased at a greater rate than any increase of the resources made available to it.
These are the principles which apply. We will deal with their application below.
Relief against Barnes
Barnes profited from his breach of fiduciary duties by secretly taking an interest in the ACB business. The manner in which he held that interest was complicated and opaque. Initially, it was held in the manner described in Annexure A to the Vickery J Principal Reasons.[23] Later, it was held in the manner described in Annexure B to the Vickery J Principal Reasons.[24]
[23]Vickery J Principal Reasons (n 10) [1001].
[24]Ibid [1041].
Vickery J held that the complicated corporate and trust structure which was adopted by Barnes and others was one of two means by which Amcor’s then employees (other than Holihan) sought to conceal the interests they had secretly taken in the ACB business.[25]
[25]Ibid [1018], [1044]. The other means was confidentiality provisions in the various agreements.
Thus, it has never been easy to identify Barnes’s interest in the ACB business, and Barnes was a party to arrangements designed to make identification of that interest difficult.
Since the arrangement set out in Annexure B to the Vickery J Principal Reasons, there have been further relevant dispositions affecting or potentially affecting Barnes’s interest in the ACB business.
As set out in the Appeal Judgment, in the course of the appeal hearing Barnes swore an affidavit deposing that in May 2013 the share in Achilla held by ACB Purchaser was transferred to Holihan Nominees Pty Ltd (‘Holihan Nominees’) and that:
Since the May 2013 transfer, I do not have any direct or indirect interest in Achilla.[26]
As we observed in the Appeal Judgment:[27]
It seems that until 2013 Barnes did maintain an interest in the ACB business, but the nature of that interest, how and to whom it was disposed of, and on what terms, is unknown. Those are matters which will need to be investigated in the course of Barnes’ account of profits.
[26]Appeal Judgment (n 1) [322].
[27]Ibid [323].
Amcor seek a declaration to the effect that Barnes’ interest in the ACB business is held on constructive trust for it. Barnes resists that, and counsel for the Holihan parties supports Barnes in resisting any declaration concerning Barnes’s interest in the ACB business being held on constructive trust for Amcor.
The submission put by the Holihan parties was that any relevant interests acquired by Barnes were held at a level above ACB Purchaser and Achilla. It was submitted that what Barnes ‘received as a result of his wrongdoing was a shareholding in his company, Brobel.’[28] The reference to ‘Brobel’ was a reference to Brobel Investments Pty Ltd, the company at the top of Annexure A to the Vickery J Principal Reasons.
[28]Transcript of Proceedings, Amcor LTD v Barnes (Supreme Court of Victoria – Court of Appeal, Ferguson CJ, Beach and Whelan JA, 17 March 2021) 28. A spelling error in the unrevised transcript has been corrected.
Counsel for Barnes in the course of his submissions pointed out that Barnes had given evidence at the trial that the ‘shareholding in that company [Brobel] was sold by him to a company called Whellan’.[29] Barnes’ counsel submission was that that company (Whellan) is a ‘third party interest which would be affected if your Honours granted the declaration of trust’,[30] and this was a reason why such a declaration ought not be made.
[29]Ibid 43. This was probably a reference to a company named Wellen Pty Ltd.
[30]Ibid.
In the hearing as to orders, senior counsel for the Holihan parties began his submissions by correcting a matter which had previously been put on a different application, advising the Court that as at 2015 Achilla had assigned the benefit of any costs orders in its favour to Holihan Nominees.[31] In response to a question as to why that had been done, the Court was told that Achilla had assigned the benefit of its counterclaim to Holihan Nominees,[32] and that that had been done pursuant to a deed executed in 2010, a copy of which had been made available to the solicitors for Amcor on the morning of the hearing.[33]
[31]Ibid 24–25.
[32]Ibid 26–27.
[33]Ibid 41.
As matters stand, it is impossible to identity what property now represents the interest which Barnes wrongfully acquired in the ACB business. The position was obscure on the material before us at the time the Appeal Judgment was handed down and it has become more obscure since then. Relevant dispositions have occurred, and it is contended that third party interests have been created. In the circumstances, we remain of the opinion that a declaration of constructive trust is not appropriate.
However, we wish to make the following matters clear:
(a) Barnes did, directly or indirectly, obtain a 50 per cent interest in the ACB business;
(b) Barnes obtained that interest in breach of fiduciary duties owed by him to Amcor Limited (now named Amcor Pty Ltd);
(c) Barnes must now account for all profits and gains he received by virtue of that wrongfully acquired interest; and,
(d) any person who has acquired Barnes’s wrongfully acquired interest is potentially liable as if they were a trustee, should the principles usually referred to by reference to the decision in Barnes v Addy[34] be held to be applicable.
[34]Barnes v Addy (1874) LR 9 Ch App 244.
Counsel for Barnes submitted a temporal limit should be placed on his obligation to account. We do not consider that any temporal limit should be placed on Barnes’s obligation to account in the circumstances existing here. Nor, given the uncertainty surrounding the entire issue, do we consider that the order for an account should specify particular amounts. Barnes should account for everything he improperly received whenever and however he received it.
Disposition of the Achilla judgment sum
Amcor seeks to have $300,000 paid to it from the Achilla judgment sum, being the balance of the purchase price under the Second Sale Agreement. Under the Second Sale Agreement, ACB Purchaser was liable to pay the purchase price (cls 2.1 and 3.1) including the final payment of $300,000. In the proceedings before Sloss J, APA (having taken the benefit of the agreement by novation from ACB Vendor) brought a cross-claim against ACB Purchaser seeking, amongst other things, payment of $300,000 as the balance of the purchase price[35], and it also claimed indemnity in relation to that amount from Holihan[36] relying upon provisions of the Second Sale Agreement whereby Holihan indemnified ACB Vendor (cl 11). There was also a provision in the Second Sale Agreement (cl 10) whereby Achilla indemnified ACB Vendor, but the cross-claim did not include a claim in relation to the $300,000 against Achilla.
[35]Second Further Amended Defence to Fourth Amended Counterclaim of the Fourth Defendant and Cross-claim dated 5 August 2015 [33(a)(i)-(v)] and Prayer for Relief C
[36]Ibid, [33](a)(vi)] and Prayer for Relief F
On 19 February 2020, Sloss J made orders which, amongst other things, dealt with the release of a charge upon payment of the final instalment of $300,000. She otherwise dismissed APA’s cross-claim.
No issue concerning the final payment of $300,000 was raised by any ground of appeal, or any submission on appeal, before us. We will make no order concerning the balance of the purchase price.
Amcor’s claim to have half of the Achilla judgment sum remain in court pending Barnes’ account is premised on the proposition that Barnes has, or had, a 50 per cent interest in Achilla, and, that either Barnes still has an interest in the judgment sum, or he has disposed of his interest in such a way as to render liable a party who now has an interest in the judgment sum. Counsel for Amcor conceded that what it was seeking was ‘akin’ to a freezing order.
Amcor has not articulated the claims which it wishes to make on the Achilla judgment sum, or the basis upon which an amount otherwise due to Achilla should be held in court pending determination of those claims. A fear that the funds will be irrecoverable if paid out was asserted, but there is no evidence on that issue before us.
We are prepared to delay the payment out of half of the Achilla judgment sum for 14 days from the date of the making of orders so as to give Amcor the opportunity to articulate, or if necessary issue, the claim or claims it makes on that fund and to apply for an order in the Trial Division (to which we will remit the matter of Barnes’ accounting), restraining disposition of that fund.
Costs of the trials
On the issues litigated before Vickery J, Amcor failed in the claims made against its former employees and their related companies, and Hodgson succeeded in his claim.
Vickery J did not order that costs simply follow the event.[37]
[37]Vickery J delivered two judgments on costs: Hodgson v Amcor Ltd; Amcor Ltd v Barnes (No 10) [2012] VSC 294 and Amcor Ltd v Barnes (No 5) [2013] VSC 51.
Vickery J separated out all the costs associated with expert evidence on the issue of the alleged uncommercial nature of the two sale of business agreements and ordered the Amcor parties to pay all of those costs. He did so because Amcor “comprehensively lost its case” on the alleged uncommercial nature of the two relevant sales.[38] He also separated out the costs of a part of the trial concerning Hodgson’s dismissal referred to as the ‘Hodgson Quantum Trial’ and ordered Amcor to pay all of Hodgson’s costs of that part of the proceeding.
[38]Hodgson v Amcor Ltd; Amcor Ltd v Barnes (No 10) [2012] VSC 294, [91] – [92]
Vickery J discounted the balance of the costs recoverable by the successful parties by reason of their misconduct in the transactions which were the subject of the proceedings. On this basis he ordered that:
·Barnes recover 25 per cent of the balance of his costs.
·Mihelic, Sangster and Bayley recover 35 per cent of the balance of their costs.
·Hodgson recover 35 per cent of the balance of his costs.
·The Holihan parties recover 75 per cent of the balance of their costs.
Vickery J deprived Hodgson, as a successful party, of some of his costs because he found he had breached his fiduciary and other duties, that his conduct had been deliberate and contrary to the thrust of legal advice, and that he had entered into arrangements designed to conceal his involvement in the relevant transactions.[39] Vickery J held that he should be deprived of costs as he had been guilty of serious misconduct in the class of fraud or preparation for a fraud undertaken in the course of the transactions the subject of the proceeding.[40]
[39]Hodgson v Amcor Ltd; Amcor Ltd v Barnes (No 10) [2012] VSC 294, [46] – [52].
[40]Ibid [53]. Relying upon the third category of cases described by Atkin J in Ritter v Godfrey (1920) KB 47, 60-61
Hodgson’s costs were ordered to be paid on a party/party basis to 10 November 2006, the date of an offer of compromise which is no longer relevant, and thereafter on an indemnity basis.
Appeals by the Amcor parties in relation to Vickery J’s conclusions concerning Barnes and Hodgson have succeeded. The costs orders made concerning them now need to be reconsidered. The existing orders will be set aside.
Otherwise, the costs orders made by Vickery J will stand.
In relation to Barnes, we consider that the appropriate order, given our conclusions, is that Barnes pay the costs of the Amcor parties in the Barnes proceeding, save for the costs of the experts as identified by Vickery J. We exclude the costs of the experts for the reasons Vickery J treated them separately.
In relation to Hodgson, the offers of compromise are important. The relevant offer which we must consider is the offer made 2 August 2007. The relevant offer on Vickery J’s findings was an offer made on 10 November 2006.
In substance, Vickery J applied the consequences provided for in r 26.08 to the costs of Hodgson recovered; being, the expert costs, the Hodgson Quantum Trial costs, and 35% of the balance. Because the orders did not cover all Hodgson’s costs, Vickery J had exercised the Court’s discretion under r 26.08 to ‘otherwise order’.
We must now reconsider the issue of the costs of the trial between Hodgson and Amcor.
It is true, as Vickery J found, that Hodgson had engaged in serious misconduct in the transactions which were the subject of the Hodgson proceeding, and that is a proper ground upon which a costs order other than that provided for by r 26.08 could be made. There are a number of countervailing considerations.
First, Hodgson’s dismissal claim has succeeded, albeit on a different basis to that for which he contended, and he has established an entitlement to a sum well in excess of the offer he made on 2 August 2007.
Second, Amcor’s claims against Hodgson have failed. It established breaches of duty by Hodgson, but its principal case was that it had suffered a substantial loss as a consequence of sales at a gross undervalue. This case was flawed, and, in our view, its shortcomings ought to have been apparent in 2007 because they are to be found in Amcor’s contemporaneous records; and, in the case of the ACB business, in the evidence always available to Amcor as to reasons for the sale and the process by which, and the persons by whom, the sale was approved.
Third, in our view there is merit in the rhetorical question posed by Hodgson’s counsel, being (with some amendment): ‘what other mechanism or strategy is available to an individual litigant to protect himself against an opponent with apparently limitless financial resources other than to make an offer of compromise?’
We are conscious of the concern that Hodgson’s conduct should not be seen to be in any way condoned. But in complex commercial litigation of this kind, the importance of encouraging parties who are ‘in the wrong’ to make reasonable offers, and parties who are ‘in the right’ to accept them, is of considerable importance.
Balancing all these considerations, we consider that there should be no order as to the costs incurred prior to 2 August 2007. This is for the reasons Vickery J gave for discounting the balance of Hodgson’s costs to 35 per cent. Amcor should pay Hodgson and Bankson Pty Ltd’s costs of the trial on a party/party basis or the standard basis (as applicable) thereafter. The offer of compromise is, in our view, a critical consideration but, given Hodgson’s misconduct, we do not consider they should have costs on an indemnity basis.
To the extent that our conclusions differ from those of Vickery J, they do so because we are exercising the costs discretion afresh. We do not find that Vickery J’s exercise of discretion involved any appellable error.
Costs of the appeal
The Holihan parties and the Amcor parties each brought an application for leave to appeal and appeals from the judgments of Sloss J. Each failed. The Amcor parties submitted that the respective appellants should be ordered to pay the respective respondents’ costs. The Holihan parties submitted that there should simply be no order as to costs. We prefer the approach of the Holihan parties. There will be no order as to costs on the applications and appeals from Sloss J.
Barnes should pay the costs of the successful appeal in relation to him. He is entitled to a certificate under s 4(1)(b) of the Appeals Costs Act 1998.
Hodgson’s offer of compromise made 2 August 2007 does not have the effect provided for under r 26.08 in the appeal proceeding, but it does remain a relevant consideration.[41]
[41]Rosa v Galbally [No 3] [2013] VSCA 159, [8]; McDonald v Dods [2017] VSCA 197.
Hodgson also made an offer of compromise in the appeal proceedings under r 26.12 on 8 May 2020. Under that rule, the offer must be taken into account.
Hodgson’s offer of compromise on appeal was that Hodgson and Bankson Pty Ltd would discontinue their application for leave to appeal the costs orders made by Vickery J and the Amcor parties would discontinue their appeals in the Hodgson proceeding.
As matters have transpired, Amcor has succeeded in its appeal concerning Hodgson’s dismissal. Hodgson’s application for leave to appeal the costs orders has been overtaken by events.
The offer of compromise made during the appeal proceeding does not assist the Hodgson parties. It cannot be said that the outcome offered is less favourable to the Hodgson parties than the outcome determined upon in the Appeal Judgment.
In all the circumstances, we consider that there should be no order as to costs on the appeals in the Hodgson proceeding.
The Amcor parties have failed in their appeals concerning Holihan’s alleged breaches of duty and they should pay the costs of the Holihan parties on those appeals.
Otherwise, there will be no orders as to costs on the appeals and applications for leave to appeal.
Restitutionary Interest
A consequence of the orders we will make concerning Hodgson is that amounts paid to him by Amcor under orders made in 2012 which we will set aside will have to be repaid.
Amcor seeks interest on amounts to be so repaid. Amcor accepts that interest should be at a ‘restitutionary’ rate not the penalty rate referred to in s 58 of the Supreme Court At 1986.[42]
[42]Meerkin v Apel[No 2] [1999] 2 VR 31, 33–4 [5]–[7].
Amcor paid Hodgson $1,693,747.26 on 21 May 2012. That sum was the total of the amount for which Hodgson had obtained judgment ($917,695) and interest as ordered by Vickery J to 17 May 2012 ($771,341.32). Before us Hodgson did not press for any additional interest in the period 17–21 May 2012. As noted earlier, interest at the penalty rate on $305,185.36 to 17 May 2012 is $257,863.72.
Thus, Hodgson must repay to Amcor $1,693,747.26 less $563,049.08 ($305,185.36 plus $257,863.72), being $1,130,698.18, plus restitutionary interest from 21 May 2012.
It was submitted on behalf of Hodgson that the appropriate restitutionary interest rate should be the Reserve Bank cash rate from time to time. Hodgson submitted that, if that rate were rejected, a rate of 2 per cent could be applied, as was applied by this Court in MLC v Daffy [No 2] (‘MLC’)][43] and in Leeda v Zeng [No 2] (‘Leeda’).[44] Amcor contended for a restitutionary rate of 4 per cent.
[43]MLC Nominees Pty Ltd v Daffy [No 2] [2018] VSCA 10 (‘MLC’).
[44]Leeda Projects Pty Ltd v Zend [No 2] [2020] VSCA 244 (‘Leeda’).
Since 2012, the Reserve Bank of Australia Cash Target Rate has steadily declined from 4.25 per cent to .10 per cent. It first dropped below 2 per cent in 2016.
In MLC and in Leeda this Court adopted a ‘restitutionary’ rate of 2 per cent. We propose to do the same.
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